Gold prices rally on renewed tariff concerns

Gold prices rallied on Monday, rising from $2,870 to $2,890 per ounce on US tariff concerns. If gold prices rise, they may encounter resistance at $2,956 per ounce, while if gold prices decline, support may be encountered near $2,830 per ounce. 

Gold prices reached a new all-time high of $2,956 per ounce last week but could not maintain their bullish momentum as many traders rushed to take their profits. Gold prices rallied on Monday, however, on renewed US tariff concerns. 

Uncertainty over US President Donald Trump’s future policies and trade tariffs promotes a risk aversion sentiment, raising the appeal of safe-haven assets, such as gold. Concerns that Trump’s trade policies may ignite global trading wars are raising the appeal of gold. 

US President Donald Trump has been using threats of imposing trade tariffs as a negotiation tool to further his agenda with other countries. Trump has threatened that he will announce reciprocal tariffs on many countries, which would raise US import taxes to match those imposed by the country’s other trading partners. If Trump goes through with these heavy tariffs, global inflation is likely to rise and econothe mic outlook will worsen, thus promoting a risk aversion sentiment that boosts safe-haven assets.

Trump’s tariff plans change rapidly, causing confusion and volatility in markets. Trump’s plans of imposing 25% tariffs on Canada and Mexico had been postponed for a month after both countries agreed to tighten border activities. On Monday, however, Trump stated that he intends to go ahead with imposing tariffs on his neighboring countries starting on Tuesday, boosting the appeal of safe-haven assets. Trump has also threatened to impose additional 10% tariffs on China on Tuesday, March 4.

Gold prices have been typically directed by the dollar’s movement, as the competing gold typically loses appeal as an investment when the dollar rises. The dollar dipped on Monday and the index dropped from 107.3 to 106.5. US treasury yields declined, with the US 10-year bond yield dropping from 4.23% to 4.17%.

In addition, US President Donald Trump’s plans to broker a peace treaty between Russia and Ukraine have so far been fruitless. On Friday, Trump had a heated meeting with Ukrainian President Volodymyr Zelenskyy in the White House. The clash confirmed that a peace treaty is not yet on the horizon, boosting safe-haven demand. On Sunday, however, European leaders gathered to discuss the situation in Ukraine. British Prime Minister Keir Starmer stated that European leaders have agreed to draft a peace proposal between Russia and Ukraine and send it to Washington.

Gold prices supported by rising Fed rate cut expectations. The US Federal Reserve held interest rates steady at its January meeting after delivering three consecutive rate cuts in 2024. FOMC policymakers voted unanimously to maintain the federal funds range to a target range of 4.25% to 4.50%. Market odds of rate cuts within the year are on the rise, putting pressure on US treasury yields and boosting gold prices. Markets are currently pricing in at least two rate cuts within 2025, with rising possibility of a third one at the end of the year.

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Written by:
Myrsini Giannouli

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